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MyWay Wealth Weekly Update (Issue #29): A sticky affair: What’s oil economics without crude politics?

I’m a free trader, the problem with free trade is you need smart people representing you we have the greatest negotiators in the world, but we don’t
use them, we use political hacks and diplomats.”
-Donald Trump (much before the recent sanctions on Iran)

Leaders of major Asian countries woke up to find themselves in deep water as the alleged poster boy for free & fair trade – Donald Trump made a not-so-free-and-fair announcement to cancel all waivers awarded to the sanctions on Iranian oil. While the reason for such an announcement was mentioned as – an attempt to curb terrorism financing; however, the United States’ equivocal stance on Pakistan does not add much credibility to their apparent concerns around terrorism.

Asia contributes to ~35% of the total global demand for oil and is incidentally a key importer of Iranian oil. Within Asia, China and India are the top two importers of the Persian oil.
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MyWay Wealth Weekly Update (Issue #28): Mutual Funds shift gears (& portfolios) this election season and more…

As the election season closed in and the pre-poll month of March’19 presented a rally – largely driven by foreign inflows, mutual fund managers capitalised on the rally to get rid of some slag and re-align portfolios in light of post-election expectations.

Here’s what the portfolio rejigs for the month of March 2019 looked like:

As evident, the industry seems to be loading up on retail consumer-oriented sectors while majorly selling off bulky wholesale business sectors. The above graph illustrates only the top five sectors bought and sold; however, the total value of stocks bought & sold in Mar’19 was INR 2,350 Cr. & INR 1,645 Cr. – net buying of over INR 700 Cr. (more…)

MyWay Wealth Weekly Update (Issue #27): Ab ki Baar, Nifty 12,000 paar? & more…

India has begun conducting the world’s largest, democratic general elections this week. Opinion polls have swung towards reinstating faith in the current government, albeit with reduced majority.
Here’s what the opinion polls conducted in March’19 look like:

While the general elections typically induce capital market volatility as most investors choose to sit tight till there’s more certainty around the political situation, this time seems to be different.

Most times, foreign investors remain fence-sitters as the great Indian elections come into play, but this time, they’ve jumped the fence onto the field – right at the beginning.

Bellwether indices have been charting new highs – Nifty at 11,700 & SENSEX at 39,000.

 

 

 

 

 

 

So, is this all happening just because everyone is expecting the current government to be re-elected? Stronger election result anticipation is definitely a factor, but that’s not all of it.
Here are a few other factors that may be aiding investment growth in India:

Stronger Currency

INR strengthened by almost 2.3% in March 2019 making it the star currency in all of Asia.

This strengthening of the INR can be attributed to a multitude of factors including foreign portfolio buying stocks & bonds to a cumulative tune of $8 billion this year.

 

 

 

 

 

 

Softening bond yields

The 10-year government bond yield softened significantly as RBI implements a solid monetary easing policy through rate cuts and other measures like the swap auction.
This is expected to increase liquidity and promote credit & growth in India while inflation continues to be in control.
Decrease in yields can be interpreted as increase in price and profits for bond-holders

 

 

 

 

 

 

 

What lies ahead? What should an investor do?

While elections typically lend an air of increased volatility to stock markets but, quite frankly, volatility is where wealth is manufactured.
All indicators seem to point towards a fundamentally strong India and stronger Indian economy. This sets stage for a stronger future for Indian equities. Now is a perfect time to step-up SIPs and for investors with a lumpsum, it is advisable to go through the STP route – invest in a holding fund and periodically transfer to pure equity funds.
Feel free to reach out to understand more around what type of equity funds suit you best and what themes do we expect to play out post-election.

Explore More

If you have any concern, please write to us at ask@mywaywealth.com or call at 080 48039999we would be happy to answer your query.

Thanks,
Nirav (Head of Research)
MyWay Wealth

MyWay Wealth Weekly Update (Issue #26): Essel Group fiasco & the way ahead for you!

It is December 2018; the mutual fund industry is just recuperating from the mess created by IL&FS defaulting on its repayment & major AMCs & rating agencies being dragged into the sludge for their failure to recognise the imminent default – intentional or unintentional is a debate for another day.

Though AMCs were nursing wounds caused by an unprecedented event, their portfolios continued to stand bold with almost INR 8,000 cr. plugged into debt securities of an already troubled Essel Group. What’s more is that over 20% of this was held in portfolios of Fixed Maturity Plans and there was no visible attempt to dilute concentration.

Cut to April 2019.

Even as IL&FS taught the industry a great lesson in risk management, many failed to learn or perhaps chose not to. This is evident by the default on FMPs which has resurfaced for perhaps the first time after the 2007-08 fiasco.

What happened exactly?
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MyWay Wealth Weekly Update (Issue #24): The Great Indian Borrowing Programme & More

“The gross borrowing is higher because of the repayment programme. My recollection on net borrowings is that we are not even touching the highest that was touched in the last five years.” -S C Garg (Economic Affairs Secretary, Government of India)

Below is the government’s borrowing plan for the next fiscal year. If this starts seeming too technical for you, advisable to skip straight to the “What does this mean for you as an investor?” section.

The Government of India announced its borrowing calendar yesterday. Last month in its budget, the government had estimated that it would need to borrow ~INR 7 Lakh Crore in the next fiscal. However, seems like the government is prepping to borrow the same quantum only within the first six months of the upcoming fiscal year.

Here’s what the borrowing plan looks like in a nutshell:

 

Borrowing Split Mode Maturity Tranches
 

 

 

INR 7.02 LCr.

 

INR 4.42 LCr.

 

GoI – dated securities

 

Varying maturity
of from 1 to 4 years to 25 years and above.

 

first six weeks – 6 tranches of
INR 17,000 Cr. each;
over 6 months – 26 tranches of
INR 17,000 Cr. each

INR 2.6 LCr. T-bill auction 91d, 182d, 364d INR 1.2 LCr. Through
91 day T-Bills

(Source: financialexpress; GoI announcement | LCr. = Lakh Crore)

What does this mean for you as an investor?
We can expect a marginal impact as yields increase, albeit marginally. The opportunity still continues to be around debt funds with an average effective maturity below ~3 years – lower, the better. It would be best to ensure a high credit quality till there’s not further clarity around the liquidity situation in India.

Meanwhile, call it a relief rally or perhaps the build-up to a bigger story, Indian equities seem to be reflecting really strong growth in the time to come. Here’s how nifty move in the week that went by:

Explore More

If you have any concern, please write to us at ask@mywaywealth.com or call at 080 48039999we would be happy to answer your query.

Thanks,
Nirav (Head of Research)
MyWay Wealth

MyWay Wealth Weekly Update (Issue #23): What Moved My Market?

Indian markets opened on a positive note this week for the sixth consecutive session on the back of energy & financial service sector positive performance but settled lower on Friday as investors booked profits.

Both Sensex and nifty went up by 0.37% and 0.26% respectively during this week.

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MyWay Wealth Weekly Update (Issue #22): Here’s how RBI is trying to kill two (or more) birds with a single stone!

“There is always the potential for a central bank to engage in discretionary monetary policy and to break the one-to-one link between changes in foreign reserves and changes in the money supply.”- Steve Hanke (American Economist)

Late evening, this Wednesday, RBI announced that it would conduct a USD/INR swap auction for $5 billion. We view this as an exceptionally well-thought implementation by RBI to infuse liquidity and manage INR rates with a single move.

How does the swap work?

Eligible banks will bid a premium (an additional amount they are willing to pay RBI) to avail the opportunity to exchange their US Dollar reserve for a Rupee equivalent from RBI. This swap allows the bank to utilise the INR for banking activities and are expected to return this INR amount to RBI along with the committed premium at the end of three years to get their USD reserves back.

How does this help India?

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MyWay Wealth Weekly Update (Issue #21): Geopolitical tensions and your portfolio

“Be fearful when others are greedy & greedy when others are fearful” -Warren Buffett

Amidst rising military escalations between India & Pakistan, it is only natural for Indian investors to worry. But, a closer look at how the Indian markets reacted in similar situations should lend a better perspective to today.

As evident by the above graph, markets have reacted negatively but for a brief period. Looking at these periods from a different perspective, one would realise that investors who held tight or perhaps purchased more during the slump emerged as the biggest winners in only a year.

But, what about the coinciding elections? Does it add fuel to the fire?

‘Elections’ are often misquoted as a major investor concern. However, the real fear is always about a change in the policy along with the government. But regulatory risks continue to exist, irrespective of the political party in power.

Think of it this way, businesses do not stop functioning post-elections, the general public do not stop demanding goods & services; then why should the value of a company deteriorate?

Sure, there will be a temporary adjustment but in the long term, equities reflect the real value of a company. (more…)

Looking for Retirement Plans? Choose from the two Government initiatives, NPS or SCSS

Retirement

“Retirement is when you stop living at work and start working at living.”

A frequent question in the minds of people today is: Do I have enough funds to retire? What will I do when I retire?

The whole point of getting high degrees, building a decent career, aiming for high salaries, saving incomes, making a wise investment and various other activities in our life are done with the intention to have a peaceful lifestyle once we retire.

We commonly hear our parents say, “I don’t want to be dependent on my children when I retire” or “I want to go on a European trip when I retire” and many such aspirations. Some have financial desires and some just want to be financially independent rather than being a burden to anyone.

Besides, retirement is a stage everybody goes through in their life, be it a government or a non-government employee.  

To provide for all these needs, it is genuine that retired or senior citizens wish for post-retirement income. This is when small saving schemes provided by the Government of India becomes absolutely necessary.

One such Scheme is:

“Senior Citizen Savings Scheme”.

The Senior Citizens Savings Scheme (SCSS) is a scheme protected and backed by the Government of India to provide regular income for senior citizens of India. Since it is provided by the Government, this scheme is a risk-free tax saving investment, which is generally preferred amongst the retired audience.

“National Pension System (NPS)”

The National Pension System (NPS) is yet another instrument provided by the Government of India, with the intention to provide pension opportunity to every Indian and to inculcate the habit of saving especially for retirement.

This article aims at answering a few typical questions that senior citizens would have about SCSS and why one should consider NPS as a better option.

Who can invest in these instruments?

  • One has to be a citizen of India to be eligible for SCSS.
  • Must fulfill any one of the below age criteria:

a). Senior citizen aged 60 years or above.

b). Retirees who have opted for the Voluntary Retirement Scheme (VRS) or Superannuation with the age between 55-60.

c). Retired defense personnel with a minimum age of 50 years.

Note: HUFs and NRIs are not allowed to invest in this scheme.  

With NPS, the criteria are simple: Any person between the age of 18 – 65 years can open an NPS account.  

What should my investment amount be?

  •    The minimum amount required for an investment in SCSS is Rs.1000.
  •    The maximum amount should be the lower of the two:
  1. An individual can invest up to 15 lakhs
  2. An individual can invest the amount received as a retirement benefit.

If it’s a joint account with a spouse, then the maximum amount is 30 lakhs.

The investment amount of NPS varies between 500 to 1000, depending on the type of NPS (Tier 1 or Tier II) you belong to. And there is no upper limit to the amount you can invest in NPS. Read More on: Types of NPS options?

The investment should be done by cheque or cash?

The SCSS account can be opened by cash or cheque. In the case of cash, the amount is below Rs.1 lakh and by cheque, the amount is above Rs.1 lakh.

You can invest in NPS within minutes using the paperless process of MyWay Wealth. All you need is to key in information with the amount you can invest and MyWay Wealth shows you the top recommended funds.  

What is the tenure of my investment?

The tenure for SCSS is 5 years. However, an extension of another 3 years is permitted.

An extension of three years is possible only on completion of the 5-year tenure. In addition, the investor needs to submit the duly filled Form B, which is regarding the extension of the scheme.

Note: Only one extension is allowed. But after one year, extended accounts can be closed and there would be no penalties charged for it.

With  NPS, there is of fixed maturity tenure and one can contribute to the account till the age of 70.

When can I withdraw my money?

The ideal withdrawal of funds for SCSS is after the tenure of the investment. However, premature withdrawal can be done but is subjected to penalties.

The penalty varies based on the period of the investment.

  • If the withdrawal is after the first year and before the end of the second year, then 1.5 % of the amount deposited is deducted as penalty.
  • If the withdrawal is on or after the second year, then 1% of the deposited amount is deducted.

NPS allows withdrawal only after 3 years of subscription and the account holder can make withdrawals up to 25% of the contributions. NPS has two types of account Tier I and Tier II, wherein:

  • Tier II account works like a savings account and hence the account holder is free to do withdrawals anytime.
  • Tier I has not withdrawal option until the account holder turns 60 except for specific situations like critical illness, child’s marriage and construction/ purchase of a property.

What are the Interest rates on my account?

The above table provides the historic interest rates on SCSS. The government has decided to review these rates quarterly and the interest is paid on the last working day of April, July, October, and January.

With NPS, there are chances of making high returns as the scheme invests a certain amount in equities as well, so investors are capable of receiving interest rates as high as 12 – 14%, which is more than the interest rates provided by other savings schemes.

Can I have multiple accounts?

The answer is Yes for SCSS. One can have an individual account, Joint account with spouse and hold multiple accounts. Though the answer is No for NPS, the point is, there is no necessity to open multiple or a second account with NPS as it is portable across locations and sectors.

What are the tax implications?

As mentioned before, SCSS is a tax saving scheme.

  • The sum invested on or after April 1, 2007, is eligible for tax deductions up to 1.5 per annum under 80C of the Income Tax Act.
  • The interest earned is fully taxable.
  • Tax is Deducted at source if interest is more than 10,000 per annum.

For NPS:

  • With NPS you can save tax up to 1.5 lakhs every year under Section 80(CCD).
  • You receive an additional tax deduction of Rs. 50,000 p.a. under Section 80CCD(1B) to save Rs. 15,480 in taxes!
  • Starting 1st of April this year, NPS on withdrawal will be totally tax exempt (like PPF and EPF, but with better returns thanks to equity exposure).

How do I Open an Account?

One has to opt for a bank to open an SCSS account after which you would have to open a Savings bank account. You would require the following documents:

  •    Two passport size photographs
  •    Aadhar card. (Absence of which one must provide a copy of the acknowledged Aadhar card application)
  •    Address and identity proof such as PAN, Aadhar card, passport or declaration is Form 60 or 61.
  •    Fill the “account opening form” provided by the bank.

Note: Have your original identity proof for verification purpose.

For NPS:

  • You can visit a point of presence (PoP), fill the prescribed form and submit the KYC documents.
  • You can also do it online at enps.nsdl.com.
  • Or simple, do it easily on your phone with MyWay Wealth app and experience the paperless KYC process by just sitting at home.

Is Nomination facility available?

Yes, the facility is available for SCSS by submitting an application as part of Form C, accompanied by the passbook of the Branch, at the time of opening an SCSS account.

NPS also provides the facility of nomination.

But in which bank do I open the account?

The SCSS account can be opened at any head post office or general post office.

The banks which offer SCSS are Allahabad Bank, Andhra Bank, Bank of Maharashtra, Bank of Baroda, Bank of India, Corporation Bank, Canara Bank, Central Bank of India, Dena Bank, IDBI Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, State Bank of India, Syndicate Bank, UCO Bank, Union Bank of India and Vijaya Bank.

The only private bank to offer SCSS is ICICI Bank. List of Pension Fund Managers for NPS are:

  • Birla Sun Life Pension Scheme.
  • HDFC Pension Fund.
  • ICICI Prudential Pension Fund.
  • Kotak Pension Fund.
  • LIC Pension Fund.
  • Reliance Capital Pension Fund.
  • SBI Pension Fund.
  • UTI Retirement Solutions.

Also, like SCSS, NPS account can also be opened through several banks as mentioned above. But why do it yourself when an app can do it for you? MyWay Wealth- India’s first and only app provides the facility of NPS for its investors. All you need is a few minutes to complete the paperless KYC process and then follow the steps below, you are all set to begin your retirement journey with NPS on MyWay.

 To sum it all up, the very objective of these Government Initiatives is to protect senior citizens from risks, cover their needs by means of assured returns.

It’s clearly seen that NPS can provide all the features that the Senior Citizen Savings Scheme can provide. Also additionally, it has tax benefits, way higher returns than usual retirement options and you can get it done easily with MyWay Wealth.

Everyone deserves a peaceful retired life after working so hard. Let your investments work for you now.

Invest in NPS on MyWay Wealth and enjoy a tension free Retirement Life!!